While most dealers, galleries, and collectors want to distance themselves from the commercial side of art and give genuine, pure love for art as their reason for selling, buying, and collecting of art, art funds operators or managers exhibit an openly money-oriented attitude toward art. After all, their goal is to maximize the rate of financial return on artworks in their collection.
An industry still at its developing stage, art investing has several advantages. Art funds are more immune to external factors like economic crises. Because art funds buy and hold on to the artworks, they are less susceptible to fluctuations in the market (Horowitz 148). Even during inflationary times, a work of art will still be worth something, whereas company shares often become worthless (Horowitz 148). Also, since the art market is “fragmented and hybrid,” a decline in price of works in one sector does not mean the same for another sector (Horowitz 148).
In Tosca Photography Fund’s year end report by Professor Finley, it is revealed that many factors affect the valuation of artworks, among which are rarity, historical and intellectual weight, uniqueness, subject matter, provenance, exhibition history, printing dates, and medium (Finley 4,5). For photography in particular, printing in editions lead to the decrease in value (Finley 4). Often times, the prices of works by other comparable artists are helpful in determining the value of an artist’s work (Finley 5).
If I were to establish an art fund, the basic design would be as follows:
1. Target for an annual return of 10-15%.
2. Diversify: Buy art in four different categories: 1) Old Masters, 2) Impressionist art, 3) Modern art, 4) Contemporary art.
3. Set the minimum contribution at $250,000.
4. 2% will be taken off for overhead and operational costs and20% for performance fee on earnings.
5. Have a lock-up period of 10 years.
6. Profits will start be distributed after the third year.
7. Lend art pieces to museums or important exhibitions to reducing storage and insurance costs add provenance and boost resale price (Horowitz 150). Lending works to exhibitions will also increase publicity. When prestigious magazines and newspapers write reviews on the works, their value accrues (Finley16).
8. Provide investors with yearly statement of professional appraisal of the art in their portfolios for confidence and integrity.
In such industry as art investing in which decisions are largely dependent upon the course of the market and auction, market analysis will be key to obtaining success when it comes to re-selling. Respected art appraisers and advisers will be of critical importance.
Moreover, apart from the most central guidelines laid down as above, the Tosca Photography Fund seems to have benefitted from carrying out retrospective exhibitions and private events as well as publications. Exhibitions and private events will help foster solidarity among investors, and publications will increase the chance of sale of the works included in the book. Negotiating with auction houses to drive the commissions down can also help in securing more profit and incurring less cost.
Sample works I would buy:
Gustave Caillebotte. The Man on the Balcony.
https://encrypted-tbn0.google.com/images?q=tbn:ANd9GcTkOhHlX0Xa98NeJCE_LzpKOOvy46KR0Kn7pHG9YArKxWNJs7vR
Geraldine Gliubislavich. Untitled. 2009.http://www.vegasgallery.co.uk/wp-content/uploads/2010/09/untitled-42.jpg